Survey shows oil, gas activity accelerating along with price
The most recent survey conducted with oil and natural gas energy firms by the Federal Reserve Bank of Kansas City showed activities within the industry climbed along with the price of oil during the third quarter.
Results of the survey
released Friday also showed executives who participated are positive the business will continue to be profitable going forward.
Other data from the survey
showed companies continue to closely control their costs while using excess cash to grow operations, reduce debt or to pay dividends to stock holders.
Some reported they remember the most recent downturn and remain accordingly cautious.
“We want to make capital improvements to upgrade our rigs; however, the 2015 downturn is always in the back of mind,” stated one executive who participated in the survey.
“Hoarding working capital rather than major expenditures is the focus over the next six months,” the executive said.
Still, for now, the business is taking advantage of good prices, especially for oil, bank officials said.
“Regional energy activity grew faster in the third quarter as prices pushed higher,” said Chad Wilkerson, the
Oklahoma City Branch executive and economist at the Federal Reserve Bank of Kansas City.
“The profitable price for oil drilling was up slightly from the past few years, but still well below current and expected prices. Overall, the results seemed pretty solid to me.”
The survey monitors oil and gas-related firms located or based in the Tenth District of the Federal Reserve Bank, which includes Oklahoma, Kansas, Colorado, Nebraska, Wyoming and parts of Missouri and New Mexico.
The Federal Reserve Bank of Kansas City uses the survey results to create indexes that measure energy industry activities, including drilling, capital spending and employment levels and costs. It showed:
• The drilling and business activity index jumped to its highest level since early 2017.
• Total revenues and employee hours indexes edged lower, as did indexes tracking employment numbers, wages and benefits and access to credit.
• Indexes tracking supplier delivery times and total profits also declined.
Wilkerson said the data showed most indexes were higher, year-over-year, and that those that were not still were at high levels.
As for the future, officials said survey data showed executives remain positive about profits, revenues and especially potential credit access.
More than 50 percent of respondents reported excess financial capital would be used to expand business through capital expenditures, while nearly 40 percent stated they would use it to reduce debt.
A quarter of respondents said they would put the cash toward boosting dividends, while 21 percent stated they would put excess cash toward wages and benefits for employees. The survey also quizzed executives on where they felt oil and natural gas prices needed to be for them to continue to turn a profit, and about what they expected prices for oil and natural gas to besix months from now and five years from now.
Participants reported the average oil price needed to be profitable was $55 a barrel, while the average natural gas price needed to be profitable was $3.23 per thousand cubic feet.
Short and long expectations among executives who participated in the survey for oil pricing were $71 and $79 a barrel, while short and long expectations for natural gas were $2.89 and $3.42 per thousand cubic feet.